McDonald's Late Night Breakfast Means It's Running Out Of Ideas

The stock has certainly responded. Shares traded at about $30
in 2005 and closed yesterday at over $98.

The formula for growth wasn’t complicated, at least in theory:
Embrace the core customer, improve the dining experience,
capitalize on a struggling economy by addressing value and
identify new meal occasions. This last strategy was
particularly important; it is difficult to build volume during
the lunch peak. So McDonald’s built volume in shoulder times
such as mid-morning and afternoon.

Apparently McDonald’s is low looking at building the late-night
segment. The company is considering offering the breakfast menu
for an extended period in a bid to bring in people at 2 AM and
4 AM.

This makes sense to me; it is another meal occasion and an
opportunity increase volume during another off-peak period.

But it also is a little concerning. The 3 AM meal occasion
can’t be that big; most people are asleep at that hour. So if
McDonald’s is studying that slot, there must not be easier,
bigger ideas on the table.

First, the company could embrace slower growth. There isn’t
anything wrong with delivering stable profits. Of course,
growth investors are not likely to be thrilled with this
approach, nor will franchisees.

Second, McDonald’s could focus on bigger growth platforms.
These will be a challenge; with bigger opportunities come
bigger risks. The new ideas might not work or might impact
sales of existing items.

Third, McDonald’s could add a second brand. After pushing
McDonald’s as far as possible, the only clear path to growth
might be a new brand. This would probably be an acquisition,
since starting from scratch would likely be too slow to have an
impact on the overall company outlook.